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Date Published : Monday, August 04, 2008
Many Australian banks are exploiting their customers by hiking up their interest rates above the required level to recoup their costs in an effort to boost profits, it has been claimed.
According to newspaper the Australian, a survey of mortgage lenders by InfoChoice found banks' profit margins have increased by over 30 per cent in the last six months - indicating that some financial institutions have pushed up rates further than would be necessary to mitigate the higher cost of lending.
The company's head of research Steven Anderson said the scale of the increases contradicts many banks' claims that the turbulent credit market is threatening their profitability.
"While the recent credit crunch has obviously had a significant impact on the local money market, there is limited evidence to suggest the costs of funding are still increasing," he said.
However, with some experts predicting the Reserve Bank will cut the base interest rate as early as this week, Prime Minister Kevin Rudd has called on banks to pass on reductions to consumers.
Yet John Mulcahey of banking, insurance and home loans specialist Suncorp has warned that banks' lending rates and the official base rate have "decoupled", with financial institutions no longer shadowing the Reserve Bank's movements.
His comments came after senior figures at two banks refused to commit to interest rate cuts.
Commonwealth Bank chief executive Ralph Norris told the Australian his company would "review its position" if a cut was made, although he did not guarantee that it would follow suit, while National Australia Bank's head of retail Andrew Thorburn said it might respond with a matching cut, a smaller cut or "no change at all".
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